A person who embarks upon his journey as a trader more often than not encounters resistance from his family, friends, and peers. One of the main contentious objections he faces is that he is warned about the markets as being a gambling den where he will eventually lose all his money. Not only is this far away from the truth, but it also projects the sheer lack of knowledge of the masses.
There is a vast difference between gambling and trading. When one gambles, he has the odds piled up against him right from the very beginning. They could be 1:10 or 1:100 or 1:1000 or even 1: 1 trillion! The greater the odds, the lesser are the chance of winning. How often can one win against such odds? Again, one could be right or one could be wrong and the chances are fifty-fifty. But with such odds, the probability of being right is very remote as compared to being wrong.
Trading on the other hand also talks of being either right or wrong and also exhibits a fifty-fifty chance. But the odds are 1:1 as there is an almost equal possibility of being either right or wrong. This is because when a trader decides to buy or sell a direction at a particular price, the instrument will either go in his favor or against him. Again, he has the possibility of exiting the trade at will. He also has a chance to size his positions based on his risk appetite.
As a trader matures and gains expertise, his understanding of the markets improves his predictions and he keeps churning more and more winners than losers. This adds to his confidence and gives him an edge.
He works on various systems and methods to derive a success formula which he consistently repeats trade after trade. His knowledge of the fundamentals, the technical and the various market forces gives him the edge to generate winning trades and reduces his chances of producing losing trades. This coupled with an astute risk management system makes this a profitable business rather than a game of chance.
This business not only generates a regular income but also helps him increase his capital investment to sizeable proportions.
No business can function without some amount of risk and every business has its nuances. So does trading the markets. Once achieved, it functions like any other business with an amount of capital, risk, profit, and loss!!!
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